A whistleblower filed a claim in 2021 with the IRS alleging that American Express sales staff knowingly encouraged businesses to underreport their taxes. According to the Wall Street Journal, this was done as part of a sales pitch stating that companies could use their AmEx cards and wire services to pay employees and vendors. AmEx sales staff reportedly told potential clients that they could then claim the fees involved as a tax deduction. The business owner could also use the accrued points from AmEx cards and convert those benefits into untaxed cash.
While point credits are not generally considered taxable income when card users purchase personal items, it is more complicated when the business earns the points that the owner then uses indiscriminately for their purposes.
Use of fake TINs
Sales staff reportedly also used false tax identification numbers (TIN) on applications between 2014 and 2018 – managers instructed them to do this because many applicants did not know offhand their TIN, and a dummy number kept the application moving through the process.
Questionable sales strategies investigated
In recent years, AmEx has set aggressive sales goals for its business-card services, and it appears that some employees distorted the benefits and costs to meet those goals. The company recently dismissed some vice presidents who headed sales teams pitching this strategy. Nevertheless, other federal agencies (including Treasury Dept., Federal Reserve, and Federal Deposit Insurance Corp) are also looking into AmEx’s approach to selling cards to businesses. The IRS is currently coordinating with other agencies.
No penalties issued yet
The IRS rewards whistleblowers for providing this information regarding tax fraud. The wheels of justice often move slowly in the federal government, but whistleblowers enjoy all the usual protections and receive a portion of the penalties and recovery.